Analysis of the UK Supermarket Sector - Research Paper Example

Introduction The last two decades has witnessed the dominance of supermarkets in the retail sector of the United Kingdom. The key essence or reason for this dominance of the supermarkets is that they have been able to provide an assortment of products as well as services at an affordable price and invariably from a single retail store destination. The UK supermarket sector has been controlled by “Big Four’’ grocery companies like Tesco, Asda, Morrisons and Sainsbury’s (Sanderson, 2007). These companies collectively control 75.4% of the market share as of the year 2012 (Butler, 2012). Tesco has occupied 30.5% in terms of grocery retail in the market, whereas Morrisons has 11.7% followed by Asda with 17.1% and Sainsbury’s with 16.1% (Butler, 2012). As UK supermarket sector is based on both grocery and retail outlets, the rate of sales for both the products base have made certain impacts on the growth of the market scenario. The rate of sales in retails had enlarged by 5.4% in September 2011 as compared to September 2010 (Office for National Statistics, 2011). Non-retailing counters and automotive fuels selling capacities have improved to 15.5 and 2.8 percent respectively from 2010 in the year 2011 (Tesco Plc, 2012). The paper intends to discuss on STEEPLE Analysis of the UK supermarket sector and evaluate the factors in the market which would impact in the organizations operating in the market. Moreover, the discussion also focuses on the assessment of the HR practices of one of the leading companies in the UK retail market, Tesco. Description of STEEPLE Analysis STEEPLE analysis is an instrumental analysis through which changes in the environment can be determined in correlation to the operations in the business sector. The analysis is based on different factors such as social, technological, political, economic, ethical, legal and environmental which have an impact on the operations of business in the UK supermarket sector. Social Factors In relation to the social factors, it is observed that there is a change in the buying pattern of different materials by the customers which significantly relates to the dimensions of lifestyle changes, alteration in income distribution and changes in living conditions. With the influence of these factors customers in the UK are favouring one-stop shopping of products (Randall & Seth, 2011). A crucial issue in context is that there is a noticeable certain change in terms of social wants with the change in time because increasing number of customers nowadays are desiring to keep themselves abreast with the latest fashion and style statements. Consequently, the retailers functioning in the UK supermarket are concentrating rapidly on products which provide them value for money. The option of finding a variety of products within one-roof in a supermarket has also been a major draw for the consumers which in turn facilitate them meet their needs and desires (Defra, 2006). Moreover, certain pertinent social factors such as birth rates, household income, gender and religion among others have affected the retail giants like Tesco, Sainsbury’s, Asda and Morrisons in the UK supermarket. In relation to augmented birth rates, it can be ascertained that retailers like Tesco have started to increasingly focus on keeping an assortment of children toys related products to open up a new target market for the company. Moreover, in the global operations companies such as Tesco need to operate keeping in consideration the religious contexts while offering products and preparing their advertisements so that the sentiments of the people in a foreign country do not get hurt. It can in turn affect their sales and profitability. Similarly, social factors such as gender and household income have also been taken into consideration by the retail companies while preparing their product assortment as products in varied price range have been a key consideration to attract consumers’ of different income range. (Tesco Plc, 2012). Sainsbury’s has focused on the aspect of ‘sourcing with integrity’ as a part of its social responsibility to ensure that customers receive quality products, however at an affordable price (J Sainsbury plc, 2011). Technological Factors With the influx of technological innovations, the UK supermarket sector has been able to reap considerable amount of benefits. Considerable developments have been made regarding the offered products and services by the retailers. Innovative technological factors such as radio frequency identification (RFID) have been made use of by the UK retail giants Tesco among other leading retailers in the UK supermarket to enhance security (Roberts, 2006). With technological advancements nowadays customers can buy products online (Kornum & Bjerre, 2005). The leading retailers such as Sainsbury’s, Tesco and Asda are significantly using their online websites to facilitate customers to track down their products, store locations and at times enable them to offer feedbacks to the companies (De Toni & Tonchia, 2003). Economic Factors Economic factors are important in the essence of the concentration of supermarkets in the UK. The key economic factors that can affect the UK supermarket sector include rate of unemployment, inflation, fluctuations in foreign exchange as well as in the rate of interest. A crucial determining economic factor which can enable to recognise consumer spending habits is UK Expenditure Index. According to a report published in the year 2011 by Visa Europe, it is recognized that consumer expenditure in terms of month-on-month assessment reduced by 0.9% in the period of September to October’ 2011 (Dods Parliamentary Communications Ltd, 2011). Consumer expenditure in terms of year-on-year basis lowered by -1.9% (Dods Parliamentary Communications Ltd, 2011). This uncertainty in the economic outlook can significantly affect the UK supermarket sector as it might deter the consumers from buying expensive products (Dods Parliamentary Communications Ltd, 2011). Contextually, gross domestic product (GDP) of the UK reduced in terms of volume by an amount of 0.4% within the first quarter as well as the second quarter of the year 2012 (Office For National Statistics, 2012). Thus, this scenario can have an influence on the consumer spending habit as it can affect the extent of their income level which in turn can deter them from purchasing luxury products offered in the supermarkets. In recent times, there has been a noticeable uncertainties prevailing in the UK economy (Barnes, 2000). A primary reason behind this has been high inflationary rates. In September 2012, the inflation rate in the UK was 2.2% which can be considered to be quite high for a developed economy such as the UK (BBC News, 2012). This scenario had in turn affected the consumer spending power significantly. The leading UK retailers also faced a considerable impact on their sales activities due to the economic uncertainties (Anderson, 2006). It has also led to the condition of unemployment and costs of products becoming higher with lowering in demand strata. Consumer spending pattern can significantly affect the retailers as without major demand for a particular section of products it can lower the value or worth of the retailer among the consumers (Defra, 2006). Environmental Factors The issues relating to social dimension on the factors of environment have forced the UK supermarket sector to focus on corporate social responsibility (Waterman, 2007). On the products which are injurious to health there has been an incorporation of greater tax rate as compared to the environment friendly products (HM Treasury, 2010). This policy has been adopted to prevent the manufacturing environment unfriendly products. Supermarkets have taken significant measures to augment efficiency in transported goods. Consumption of less fuel in transported vehicles has been a key initiative in this sector. Increase in car usage has been a major environmental concern with the increase in supermarkets (Oxford University Press, 2011). Political Factors In the UK, the Competition Commission functions as the regulator in order to ensure fair trade is practiced by the companies operating in the market. Megastore and supermarket development has been a major political issue in the UK in the past decade, which has affected the smooth functioning of the retailers in the market (Howker, 2009). While operating in different markets, the leading supermarket companies in the UK have to face varying rates in the taxation as well as regulations imposed by local governments (Slideshare, 2012). Legal Factors Different policies and rules of the government have an impact on the process of operations of the supermarkets in the UK. The aim of the government in the UK is to regulate the price wars in the market and safeguard the security of the customers. The policies of the government have significantly focused on refuting the entry of other competitors in the markets as well to sheltering the leading companies that are already dominant in the market (Defra, 2006). Ethical Factors Ethical factor is one of the important factors as it includes ethics and governance of corporate entities in the business process in the UK. It has been expected from the legal point of view of the supermarket sector of UK to perceive good ethical conditions and precise governance in the corporate scenario. According to the laws related the market there should depiction of greater amount of honesty and transparency by the retailers towards their services and their customers. Greater amount of liability towards their work is also maintained by the retailers in order to increase trust of the consumers (Business & IP Centre, 2012). These factors show a vivid description about the work process of the supermarkets in the UK, where among seven, four factors, social, economic, political and technological are more important for regulating an organization in an efficient manner. Summary and Findings It is observed that as the supermarket sector in the UK is based on the products sold in retailing and through grocery retailing, the organizations operating in the market focus on the technological factors and also on the prices of the products. The products are made with advanced technology as with the use of technology it is possible to produce better products and in bulk quantities to satisfy the demands of the customers. Moreover, in-store a number of technological features such as RFID technology has been used to facilitate the security aspect within the stores. The organizations also focus on gaining economies of scale from their operations to make efficient use of their resources and achieve greater value from their operations. The big four companies which include Tesco, Sainsbury’s, Asda and Morrisons usually hold their position in the market due the efficiency of their operations and with incorporation with suitable business strategies in keeping with demands in the UK market. The companies have also focused on ensuring their corporate social responsibilities by offering environment friendly products and have also ensured that they uphold utmost ethical standards in their operations. These factors have increased the trust of the consumers, thus facilitating in increasing the footfall in the stores of these leading retailers within the UK supermarket sector HRM Example Related to Tesco In order to comprehend the human resource management practices or policies by a retailers operating in the UK supermarket sector, Tesco has been considered. Tesco is a globally leading multinational retailer based in the UK. It is recognised as one of the global leaders as a general merchandise and grocery retail company. It has more than 240000 employees (Tesco Plc, 2012). The company believes in developing their people, who they consider to be human assets. Tesco believes in the value and notion of treating ‘people how we like to be treated’ (Tesco Plc, 2012) The company believes that their employees should provide ultimate commitment to serve their customers. In return the employees are offered good careers with attractive job prospects. With regard to HR policies, training plays a key role. The company’s state-of-the-art training academy in Asia serves as a major factor in facilitating to develop the human capital. Offering valuable jobs to the unemployed people through Regeneration Partnerships is a major aspect in the HR practice of the company. Tesco also supports the development and elevation of women to management positions as a part of its HR practices (Tesco Plc, 2012). The human resources policies in Tesco are linked with different approaches to increase the performances of the employees. The essence of the employed strategies with regard to human resource practices in Tesco endeavours to motivate the employees to work harder and efficiently towards the achievements of the goals in the organization. The approaches also facilitate the employees to increase their competencies and serve the organisation in an efficient way. Human resource management is a part of the management for the organization, Tesco whose aim is to make the best use of the talent and skills of the employees in the organization and make the best use of their knowledge to ensure that customer satisfaction is ascertained. The planned approach is essential for the organization as it helps in refinement of the capabilities of human resources. In the context of changes in the environment, it is required to change the planned approach to the functions of human resource. The issues in the strategic planning can be considered as the function of the management for a long-term period for the overview performance of the organization. The approach suggests towards setting new significances for the organization which is related to strategy and business (Williamson et al., 2012). The old-fashioned management for human resource aimed at the physicality of the individual skills. It gave more emphasis to the tasks done by the employees than on the number of people in the organization. The management of human resource in Tesco focuses on the contribution made by the employees and their efforts in the work procedure. By this approach, it is possible for the employees to emphasize on the significance of the main business with response to profits in the organization, the value of the firm as a whole. It brings synchronization among all the measures taken by the approach which affects the attitudes and behaviour of the employees by its implementation that provides a business to acquire a viable strategy. Strategies should be well planned in order to mitigate the gap between the present situation and the future position of the organization. It is also mandatory to preserve the talented employees of the organization by the management to accomplish the goals in the long run. The company treats the employees as talented individuals and includes them in the process of decision making. The strategy helps to recognize the major causes of deficiency within the operations of the organisation as skilled employees can facilitate the management in decision making process about the organisation and also to discover the opportunities present for the betterment of the organization. The company has made use of the situation by interacting with the customers. It maintained certain strategies like innovation in the products and welfare management among others to occupy worthy position in the retail industry. Its significant consequence has been the increment in the satisfaction of the customers, efficiency in the work process and most importantly inspiring the employees to work hard among others (Tesco Plc, 2012). The overall improvement of the employees in the organization is where the strength in the organization i.e. Tesco lies. The main aim of the company is to focus on ensuring the utmost utility from their operations by leveraging the skills of the employees with the application of the HR strategies. In the company the policies and the procedures in HR goes along with strategies placed in the marketing context which enable it to operate effectively. The strategies in HR aid in ascertaining the distinction between production and services of the employees which enhance the competitiveness of the organization. This approach or policy is very important as it facilitates the employees to come in interaction with the customers directly. However, it is observed that the practices and purposes of the human resource management in Tesco enables to accomplish the improvement of skills for the individuals, develop work culture in the organization, improve teamwork and most importantly enhance productivity. Human resource is an important factor in the organization as it helps to create a cordial relation with the satisfied customers and the employees. Therefore, it is required for the managers as well as the supervisors to ensure that employees are passionate, motivated and productive in the organization. Tesco, over the years, has been able to uphold these dimensions in their human resources practices, which is a critical factor in the success of the organisation. Conclusion UK supermarket sector is primarily divided in terms of grocery and retail products. The big four retail companies including Tesco, Asda, Morrisons and Sainsbury’s are the leading players in the market that dominate the preference of the consumers. The companies generally face a number of critical factors such as political, technological and social among others which affect their operations. However, in recent times the companies in the market have been functioning quite efficiently which has enabled them to attain greater profits and sustainability. Tesco has been a leading name among the retailers functioning in the UK supermarket. In terms of its HR practices, the company has focused on providing its employees regular training and considers them as human assets. It has also incorporated them in decision making process of the organisation thus increasing their commitment towards the organisation. References Anderson, R. G., 2006. Inflations economic cost: how large? How Certain? The Regional Economist, pp. 5-9. Business & IP Centre, 2012. 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